Deputy Assistant Secretary of State for Economic Affairs Peter Harrell

Brussels, Belgium

September 18, 2012

Remarks as prepared

Opening

I would like to thank the organizers of the Tenth Conflict-Free Minerals Supply Chain Workshop – EICC and GeSi - for the opportunity to speak today. I know that a tremendous amount of work has gone into this conference, which was evident from the terrific sessions yesterday. Bob Leet (Intel) and Mike Loch (Motorola Solutions) and the conference sponsors have been wonderful hosts.

EICC and GeSi have accomplished something quite impressive: convening an industry to develop supply chains that will help to reduce conflict in a part of the world that can seem far removed from the electronics that we rely on every day - to work and communicate.

Those of you who have had the pleasure of hearing Secretary Hillary Clinton speak about the Democratic Republic of the Congo know that she is personally committed, on behalf of the U.S. government, and by working with the private sector, to reduce conflict in the DRC. And what you are doing, across industries and sectors is valuable, not only because of its impact on the Great Lakes region, but as a template for responsible business conduct worldwide.

I know that many of you have heard previously from Ambassador Barrie Walkley, the U.S. Special Advisor, and others, about the current situation in the Great Lakes region. A representative from the United Nations Group of Experts will speak on that a little later this morning. I'm here today from the State Department's Bureau of Economic and Business Affairs. The role of my bureau is to listen to and support the U.S. business community – a community which has a worldwide reach and multiple partnerships -- and to support sustainable economic growth at home and around the world. We understand the global dimensions of the conflict minerals issue. And we know that the SEC's recently enacted conflict minerals rule will affect many companies in this room and many more stakeholders who are not in the room yet.

I'd like to begin by picking up on a question that was posed at the end of yesterday's sessions--the question of what, exactly, we're working together to achieve.

I think the answer to that question, at least from my perspective at the State Department, is actually fairly simple --though the getting there is complex. We're trying to break the link between conflict in the Congo and the Congolese minerals trade. Businesses and consumers need to have confidence in what they are buying. And miners throughout the Great Lakes region need to see the mining sector contribute--as we know the mining sector can and should--to broad-based, sustainable development. We're trying to put in place the legal frameworks, supply chain verification mechanisms, commitments from governments in the region, and the stakeholder engagement needed to make that happen.

Now, none of us should underestimate the difficulty of that task. But I think the initiatives discussed here at the 10th Conflict-Free Minerals Supply Chain Workshop show the promise of what can be accomplished.

SEC Conflict Mineral Rule

The Securities and Exchange Commission (SEC) adopted the implementing rule for Section 1502 of the Wall Street Reform and Consumer Protection Act – also known as Dodd-Frank Section 1502 – on August 22, 2012.

The SEC admitted that the issuance of the rule was a challenge because its initial proposal generated approximately 400 comments and 140 meetings. I'm sure that some of you here today were involved in those comments and in those meetings.

The SEC noted that they had looked closely at existing stakeholder initiatives, such as those represented here today, and listened carefully to the comments from those who had already set up due diligence efforts.

As Mike explained during his presentation yesterday, the rule requires companies that file reports with the SEC to publicly disclose their use of four ores that produce tin, tantalum, tungsten and gold that are sourced from the DRC or an adjacent country if these materials are necessary to the functionality or production of a product.

Due diligence requires these companies to determine whether these minerals directly or indirectly benefit armed groups or abusive armed forces in the Africa Great Lakes region and inform the SEC of their efforts.

The rule does not prohibit the importation, trade, or use of any of the four minerals from the DRC or adjoining countries. It is a due diligence and disclosure requirement.

The rule itself is rather complex, and so I'll leave a detailed discussion to others. I also don't have Mike's handy and useful PowerPoint to lay it out for you! But the SEC has informed us that they will respond to inquiries. The rule was published in the U.S. Federal Register on September 12 and will take effect within 60 days – November 11.

But the U.S. government's approach to breaking the link between the minerals trade and conflict in the DRC extends far beyond Congress passing Section 1502 and the SEC's recent regulatory action.

The U.S Remains Committed to the Goals of Dodd Frank Section 1502

The United States is firmly committed to a broad-based approach to supporting the end of conflict and human rights abuses in Africa’s Great Lakes region. And let me be clear: the U.S. wants to promote investment in responsible minerals trade in the region. We want the Eastern DRC and the broader Great Lakes region to be stable and prosperous, and a growing mining and minerals sector should be an important part of the region's future. I know that some companies have questions about whether they should source from the DRC. It is our goal to work with governments in the region, the private sector, and NGOs to ensure that you are able to source conflict-free minerals from the region.

We recognize the work that the DRC has taken to improve the legislative and administrative framework to make due diligence on minerals possible. And we encourage other states in the region to adopt the necessary frameworks.

The U.S. Agency for International Development--USAID--and the State Department are also supporting local, provincial and national pilot efforts in the DRC to target and demonstrate pilot supply chains, engage with communities in mitigating conflict and enhancing alternative livelihoods. In fact, we're spending $18 million to improve the minerals sector in the DRC.

These efforts include infrastructure and regulatory reform, support for supply chain initiatives, training and equipment for the DRC's mining police, and training on the rule of law. We are also working with governments and civil society to promote accountability for those responsible for violence and conflict in the Congo.

As security has worsened in the DRC’s North Kivu province, USAID, together with the Germans, supported the DRC Mines Ministry meeting with stakeholders to re-focus all of eastern DRC’s efforts to continue pilot projects where security allows. At present, the priorities include areas in South Kivu and validation/certification in Maniema.

More broadly, we're working with governments as well as non-governmental organizations in the region to reduce conflict and promote regional stability. Ambassador Walkley and officials at the State Department in Washington and across the Great Lakes region are working every day to build the political and diplomatic will needed in the region to reduce conflict. The European Union and many governments in Europe and around the world are also engaged and committed to this work.

I'd like to acknowledge the work of the International Conference of the Great Lakes Region (ICGLR) in creating their Initiative on the Illegal Exploitation of Natural Resources. It has created a regulatory and legal framework for assuring there is a system for monitoring and controlling the illegal exploitation of natural resources.

We continue to urge the ICGLR’s member states to implement the initiative at the domestic level. And we regularly engage with governments in the region to promote sound, effective regulatory schemes for the mining sector.

USAID will be supporting the ICGLR in its management and administrative procedures to support its work on conflict minerals.

We expect to have a coordinating meeting with members of USAID missions in the next few months to map out our work.

In-region efforts will be essential to ensure that conflict-free minerals trade in the region continues and expands.

The U.S. Values Public-Private Partnerships to Achieve These Goals

But as this conference--and EICC and GeSi's work makes clear--business also has an important role to play. Now that the Dodd Frank Section 1502 rule has been adopted, businesses need to keep working together to expand supply chain sourcing initiatives.

Programs such as the Public-Private Alliance for Responsible Minerals Trade (PPA) is one effort to support conflict-free sourcing while improving coordination and dialogue among government, industry and civil society.

The ITRI Tin Supply Chain Initiative (iTSCi) traceability system’s implementation in Katanga and Rwanda has proven that chain of custody can work. In addition, the response by the Government of the DRC, including the Katanga provincial government, to suspend trade from conflict-affected regions of Katanga, has also shown the credibility of the pilot efforts. USAID is financing further expansion of traceability efforts where security allows.

The Conflict-Free Smelter Program; the World Gold Council’s Conflict-Free Gold Standard; Solutions for Hope for tantalum ore– all these also demonstrate that the business community has already found ways to make supply chains reliably conflict-free.

Private Sector and Civil Society Efforts – Let’s Work Together to Bring More Firms into the Process

Each successful pilot initiative is an important step. Each conflict-free mine benefits miners and their families and shows communities still affected by conflict the possibility of a better future. And each conflict-free mine shows the business community and global consumers that conflict-free minerals can be sourced from the DRC.

But now our challenge is to scale up these pilot programs, continue to press regional governments to reduce conflict, and strive to make certification easy and practical for companies.

As the United States, we encourage other countries to look at regulations to promote conflict free supply chains. But we encourage countries to work with us and with each other so that regulations across different jurisdictions are consistent with each other to reduce business compliance costs.

We also have to continue our outreach to the private sector, encouraging a broad range of companies around the world to join in industry-driven supply chain initiatives. Businesses, too, have an important role to play in convincing other businesses--from smelters to end users--to join with them to create the necessary pathways and lay the groundwork with their suppliers.

And, of course, we must remain engaged with regional governments--because ultimately they must be able to provide a secure and stable operating environment, not just for mining, but for their citizens’ livelihoods.

The Dodd Frank 1502 rule will affect many businesses around the world. For those in the room working on conflict-free supply chains: let me say - be prepared to scale-up. We expect more firms to join you.

It may well be a challenge for the active stakeholder community to incorporate new members into their processes and manage the accompanying tensions that expansion brings. But your efforts already demonstrate the positive benefits of joining in partnership with others.

Your experiences will be vital in leading others through this new process. Business-to-business leadership is an essential component to success.

The State Department is ready to speak to those who have not yet joined responsible supply chain efforts –all stakeholders. Please let us know how we can help your efforts to expand the participation of others in these efforts.